RegTalk: 7 Things You Can Do Now To Prepare For Illinois' Recreational Marijuana Application Process

The Illinois Legislature passed a bill on Friday that legalizes adult-use marijuana businesses. Entrepreneurs who want to start a cannabis business should start preparing now in order to ensure a place in the front of the line.

The legislation requires the Department of Agriculture and the Financial and Professional Regulation to begin accepting applications for early approval adult use businesses within 60 days of new law’s effective date. These businesses may begin selling adult use products on January 1, 2020. This market is limited as there are currently only 55 licensed medical dispensaries and 22 licensed cultivators in Illinois.

A total of 75 dispensary licenses will be granted by May 1, 2020. The dispensary license application will be made available no later than October 1, 2019.

Below are 7 steps that you should take to ensure that you receive a license. Application packages should be organized, professional and easy for the regulator to find what they need.

• Apply as an Early Approval Adult Use Businesses. Current Medical Marijuana license holders may apply within 60 days as an early approval adult use business that can sell adult use products on January 1, 2020. The accelerated access to the market comes with a price. Medical Marijuana licensees choosing this route will pay a $30,000 nonrefundable fee, a 3% cannabis business development fee, and a social equity fee.
• Capital. Start looking for smart capital. Your corporate structure should be simple and representative of your capital raises. Resist the urge to give away shares in return for human labor. Vet your investors to ensure that the money is coming from a legal source and that the investor does not have a criminal background. Applicants must show that they have access to $100,000 in liquid assets.
• Understand Illinois’ scoring methodology. The Department of Agriculture and the of Financial and Professional Regulation must utilize a fair scoring methodology for comparing competing applications. Below are some high-level activities that can help prepare you.
  • Ensure that all owners, officers, managers have the character, veracity, background, qualification, and experience to fund the business. Regulators will perform background checks and reject applications in which individuals lied. Regulators also want to know that the managers have the knowledge and expertise to run the business successfully.
  • Create a business plan. The regulators will review the business plan to ensure that adequate supplies of marijuana will be provided and that adequate safety and security plans are in place to prevent diversion. The business plan should show that there are adequate funds to cover the first year operating expenses. Business plans should also show how the business will comply with regulations including seed-to-sale tracking, training, recordkeeping, and day-to-day operations.
  • Staffing plan. Develop a staffing plan that shows how you will ensure that qualified individuals will be running the shop, and describe the business’ consent to enter into a peace labor agreement with employees.
  • Create a security plan. The regulators will want a site plan that shows intended security including video cameras, areas of coverage, automatic and immediate alarms, limited access areas, lighting coverage on the exterior and interior - focus on areas where marijuana is transported, processed and stored.
  • Create bios or resumes for owners and managers showing relevant experience and experience in the legal marijuana market
  • Create a community outreach and social equity plan. Create a plan to show how you will inform the community about your business, and give back to the community through involvement, employment opportunities or other positive impact activities.
• Identify Suitable Real Estate. Identify real estate in a municipality that is likely to allow the adult use marijuana businesses. This is generally take more time than expected in that you will need to consider minimum requirements related to the premises site including:
  • Look for properties at least 1,500 feet from another cannabis business and 1,000 feet away from schools. There may be other minimum distance restrictions for other organizations such as churches or drug rehab facilities,
  • Avoid residential areas- residences are not generally allowed.
  • Ensure that the local municipality plans to allow adult use establishments.
  • Understand the local zoning requirements and fire safety requirements.
  • Obtain approval from the landlord to operate a marijuana establishment.
• Develop a Scaled Site Plan: Create a site plan for your premises including all entrances, exits, windows, and outline all areas including patient waiting areas, sales area, and storage. Identify areas that contain video cameras and other alarms.
• Organize Your Financial Information: Organize your tax, banking, and securities information for the past 3 years. Make the package easy for the regulators to review. The regulators will want to ensure that your money was made legally and all taxes have been paid.
• Try to Establish a Banking Relationship. Banks are hesitant to provide services to marijuana businesses as they may be charged with money laundering; however, this is changing. Develop a relationship with a bank to understand what they will need to provide you with basic services. Understand that the bank will be required to file a suspicious activity report (SAR) to the federal government when you inform them that the account will be used for a legal marijuana business. You should not try to falsify information as this will make matters worse, and possibly prevent you from obtaining a banking relationship anywhere.

Susan Ameel is a co-founder and partner at Global Regulatory Risk Advisors, which offers a cannabis service, THC Regs.